Mechanics Bancorp
05/08/2026 | Press release | Distributed by Public on 05/08/2026 11:49
Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited consolidated financial statements and related notes appearing elsewhere in this Quarterly Report and in our Annual Report on Form 10-K for the year ended December 31, 2025 ("2025 Annual Report on Form 10-K") filed with the SEC. This Quarterly Report contains forward-looking statements that involve risks and uncertainties, including those described in the section entitled "Cautionary Note Regarding Forward-Looking Statements." There are a number of important risks and uncertainties that could cause our actual results to differ materially from those discussed in these forward-looking statements. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in our other disclosures and filings.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, including information incorporated by reference herein, contains, and future oral and written statements of the Company and its management may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, contained or incorporated by reference in this Quarterly Report, including statements regarding our plans, objectives, expectations, strategies, beliefs, or future performance or events, are forward-looking statements. Generally, forward-looking statements include the words "anticipate," "believe," "could," "estimate," "expect," "intend," "look," "may," "optimistic," "plan," "potential," "projection," "should," "will," and "would" and similar expressions (or the negative of these terms), although not all forward-looking statements contain these identifying words. Forward-looking statements involve known and unknown risks, uncertainties, assumptions, estimates, and other important factors that could cause actual results to differ materially from any results, performance or events expressed or implied by such forward-looking statements.
We caution readers that actual results may differ materially from those expressed in or implied by the Company's forward-looking statements. Factors that could affect the Company's future results from those expressed or implied in any forward-looking statements include, but are not limited to:
•substantial non-recurring and integration costs, which may be greater than anticipated due to unexpected events;
•failure to realize the anticipated benefits of the Merger;
•our ability to effectively manage our expanded operations;
•negative developments and events impacting the financial services industry;
•the soundness of other financial institutions;
•our ability to maintain sufficient liquidity, or an increase in the cost of liquidity;
•unpredictable economic, market and business conditions;
•interest rate risk, and fluctuations in interest rates;
•inflationary pressures and rising prices;
•adverse changes in real estate market values;
•the impact of climate change, including indirectly through impacts on our customers;
•the adequacy of our allowances for credit losses for loans and debt securities;
•incurring losses in our loan portfolio despite strict adherence to our underwriting practices;
•fluctuations in our mortgage origination business based upon seasonal and other factors;
•our geographic concentration, which may magnify the adverse effects and consequences of any regional or local economic downturn;
•the accuracy of independent appraisals to determine the value of the real estate that secures a substantial portion of our loans;
•the ability of our small- to medium-sized borrowers to weather adverse business developments;
•our ability to fully identify and mitigate exposure to the various risks that we face, including interest rate, credit, liquidity and market risk;
•our ability to mitigate our exposure to interest rate risk;
•negative publicity regarding us, or financial institutions in general;
•environmental liability risk associated with our lending activities;
•our ability to manage risks associated with new lines of business, products, product enhancements and services;
•our ability to adapt our services to changes in the marketplace related to mortgage servicing or origination, technology or in changes in the requirements of governmental authorities and customers;
•our ability to develop, implement and maintain an effective system of internal control over financial reporting;
•the potential that we may identify material weaknesses in our internal control over financial reporting in the future, which may result in material misstatements of our financial statements;
•the potential that we may write off goodwill and other intangible assets resulting from business combinations;
•dependence on our management team;
•exposure to fraudulent and negligent acts by our customers and the parties they do business with, as well as from employees, contractors and vendors;
•legal claims and litigation, including potential securities law liabilities;
•employee class action lawsuits or other legal proceedings;
•our ability to raise additional capital, if needed;
•competition from other financial institutions and financial service companies;
•regulatory restrictions that may delay, impede or prohibit our ability to consider certain acquisitions and opportunities;
•extensive supervision and regulation that could restrict our activities and impose financial requirements or limitations on the conduct of our business and limit our ability to generate income;
•our ability to comply with stringent capital requirements;
•the impact of federal and state regulators' examination of our business;
•our ability to comply with the Bank Secrecy Act and other anti-money laundering statutes and regulations;
•our reliance on dividends from Mechanics Bank;
•our ability to raise debt or capital to pay off our debts upon maturity;
•our level of indebtedness following the completion of the Merger;
•increasing and continually evolving cybersecurity and other technological risks;
•our ability to adapt to rapid technological change;
•our ability to effectively implement new technological solutions or enhancements to existing systems or platforms;
•our ability to manage risks and challenges relating to the development and use of artificial intelligence;
•our dependence on our computer and communications systems;
•our ability to effectively manage and aggregate data;
•Ford Financial Funds and their controlled affiliates control approximately 77% of the voting power of Mechanics Bancorp, and have the ability to elect all of our directors and control most other matters submitted to our shareholders for approval;
•we are a "controlled company" within the meaning of the rules of Nasdaq and, as a result, we qualify for, and rely on, exemptions from certain corporate governance standards;
•future sales of shares by existing shareholders could cause our stock price to decline;
•our reliance on certain entities affiliated with the Ford Financial Funds for services;
•reduced disclosure requirements as a smaller reporting company; and
•certain of our shareholders have registration rights, the exercise of which could adversely affect the trading price of our common stock.
A discussion of the factors, risks and uncertainties that could affect our financial results, business goals and operational and financial objectives is also contained in Item 1A "Risk Factors" included in our 2025 Annual Report on Form 10-K, filed with the SEC. We strongly recommend readers review those disclosures in conjunction with the discussions herein. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, and should not be relied upon as a prediction of actual results or future events.
Forward-looking statements in this Quarterly Report are based on management's expectations at the time such statements are made and speak only as of the date made. We do not assume any obligation or undertake to update any forward-looking statements after the date of this Quarterly Report as a result of new information, future events or developments, except as required by federal securities or other applicable laws, although we may do so from time to time.
All future written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to above. New risks and uncertainties arise from time to time, and factors that we currently deem immaterial may become material, and it is impossible for us to predict these events or how they may affect us.
Overview
Mechanics Bancorp is a financial holding company and primarily operates through 121-year-old Mechanics Bank, a full-service community bank with 166 branches throughout California, Washington, Oregon and Hawaii. Following the strategic Merger of HomeStreet Bank with and into Mechanics Bank on September 2, 2025, with Mechanics Bank surviving the Merger as a wholly owned subsidiary of the Company, the assets, liabilities and operations of HomeStreet Bank became the assets, liabilities and operations of Mechanics Bank. Headquartered in Walnut Creek, California, Mechanics Bank provides a wide range of products and services in consumer and business banking, commercial lending, cash management services, private banking, and comprehensive wealth management and trust services.
General
The Company's management's discussion and analysis of results of operations and financial condition ("MD&A") is intended to assist the reader in understanding and assessing significant changes and trends related to the results of operations and financial condition of the Company. This discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying footnotes in this Quarterly Report on Form 10-Q.
Recent Developments
Presentation of Results - HomeStreet Bank Merger
On September 2, 2025, we completed the Merger of HomeStreet Bank, the wholly-owned subsidiary of Mechanics Bancorp (formerly known as "HomeStreet, Inc.") with and into Mechanics Bank, with Mechanics Bank as the surviving bank. Mechanics Bank is the accounting acquirer ("legal acquiree"), HomeStreet Bank is the accounting acquiree and Mechanics Bancorp is the legal acquirer. In this Quarterly Report on Form 10-Q, our financial results for all periods ended prior to September 2, 2025 reflect Mechanics Bank's results on a standalone basis. In addition, our reported financial results reflect Mechanics Bank's financial results on a standalone basis until the closing of the Merger on September 2, 2025 and results of the combined company beginning September 2, 2025. The number of shares issued and outstanding, earnings per share, and all references to share quantities or metrics of Mechanics Bancorp have been retrospectively restated to reflect the equivalent number of shares issued in the Merger since the Merger was accounted for as a reverse acquisition. As the accounting acquirer, Mechanics Bank remeasured the identifiable assets acquired and liabilities assumed in the Merger as of September 2, 2025 at their acquisition date fair values. The estimates of fair value were recorded based on initial valuations at the Merger date. These estimates are considered preliminary as of March 31, 2026, are subject to change for up to one year after the Merger date, and any changes could be material.
Unless we state otherwise or the content otherwise requires, references in this Quarterly Report on Form 10-Q to "Mechanics," "we," "our," "us" or the "Company" refer collectively to Mechanics Bancorp, Mechanics Bank (the "Bank") and other direct and indirect subsidiaries of Mechanics Bancorp, following completion of the Merger. In some instances, we refer to Mechanics Bank prior to the effective time of the Merger as "legacy Mechanics Bank," HomeStreet Bank prior to the effective time of the Merger as "legacy HomeStreet Bank," and HomeStreet, Inc. prior to the effective time of the Merger as "legacy HomeStreet, Inc."
Asset Sale
As discussed in Note 17, "Subsequent Events-Asset Sale," on May 1, 2026, Mechanics Bank completed the previously announced sale of its DUS business line to Fifth Third.
Critical Accounting Estimates
The following discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements and the notes thereto, which have been prepared in accordance with GAAP and accounting practices in the banking industry. Certain of those accounting policies are considered critical accounting policies because they require us to make estimates and assumptions regarding circumstances or trends that could materially affect the value of those assets, such as economic conditions or trends that could impact our ability to fully collect our loans or ultimately realize the carrying value of certain of our other assets. Those estimates and assumptions are made based on current information available to us regarding those economic conditions or trends or other circumstances. If changes were to occur in the events, trends or other circumstances on which our estimates or assumptions were based, these changes could have a material adverse effect on the carrying value of assets and liabilities and on our results of operations. As a result of the
Merger, the Company updated critical accounting estimates. Management believes the ACL policy and estimate, the valuation of single family MSRs and business combinations estimates are important to the portrayal of the Company's financial condition and results of operations and requires difficult, subjective, or complex judgments and, therefore, management considers them to be critical accounting estimates. There have been no material changes in the methodology of these estimates during the three months ended March 31, 2026.
Our critical accounting policies and estimates are described in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations included in our 2025 Annual Report on Form 10-K.
Summary Financial Data
| Quarter Ended | |||||||||||||||||
| (dollars in thousands, except per share amounts) | March 31, 2026 | December 31, 2025 | March 31, 2025 | ||||||||||||||
| Select income statement data: | |||||||||||||||||
|
Net interest income (1)
|
$ | 179,045 | $ | 182,982 | $ | 128,454 | |||||||||||
|
Provision (reversal of provision) for credit losses on loans (1)
|
7,593 | (1,908) | (3,752) | ||||||||||||||
| Provision (reversal of provision) for credit losses on unfunded lending commitments | 174 | (1,316) | 94 | ||||||||||||||
| Noninterest income | 21,020 | 78,521 | 14,981 | ||||||||||||||
| Noninterest expense | 130,427 | 129,510 | 85,638 | ||||||||||||||
|
Income before income tax expense (1)
|
61,871 | 135,217 | 61,455 | ||||||||||||||
|
Net income (1)
|
44,090 | 111,187 | 43,791 | ||||||||||||||
|
Basic earnings per share: (1)
|
|||||||||||||||||
| Class A common stock | $ | 0.19 | $ | 0.48 | $ | 0.21 | |||||||||||
| Class B common stock | $ | 1.91 | $ | 4.80 | $ | 2.07 | |||||||||||
|
Diluted earnings per share: (1)
|
|||||||||||||||||
| Class A common stock | $ | 0.19 | $ | 0.48 | $ | 0.21 | |||||||||||
| Class B common stock | $ | 1.91 | $ | 4.80 | $ | 2.07 | |||||||||||
| Basic weighted-average shares outstanding: | |||||||||||||||||
| Class A common stock | 221,047,803 | 220,865,980 | 200,884,880 | ||||||||||||||
| Class B common stock | 1,114,448 | 1,114,448 | 1,114,448 | ||||||||||||||
| Diluted weighted-average shares outstanding: | |||||||||||||||||
| Class A common stock | 221,203,293 | 221,095,493 | 200,944,300 | ||||||||||||||
| Class B common stock | 1,114,448 | 1,114,448 | 1,114,448 | ||||||||||||||
|
Select performance ratios: (1)
|
|||||||||||||||||
|
Return on average equity (2)
|
6.25 | % | 15.80 | % | 7.61 | % | |||||||||||
|
Return on average tangible equity (2),(3)
|
11.07 | % | 25.59 | % | 12.76 | % | |||||||||||
|
Return on average assets (2)
|
0.82 | % | 1.97 | % | 1.08 | % | |||||||||||
| Efficiency ratio | 65.2 | % | 49.5 | % | 59.7 | % | |||||||||||
|
Efficiency ratio (non-GAAP) (3)
|
61.6 | % | 46.7 | % | 57.8 | % | |||||||||||
|
Net interest margin (2)
|
3.61 | % | 3.50 | % | 3.45 | % | |||||||||||
(1)Prior period comparative disclosures for the fourth quarter of 2025 have been adjusted to reflect the impact of adoption of ASU 2025-08.
(2)Ratios are annualized.
(3)Return on average tangible equity, efficiency ratio (excluding the impact of intangibles amortization), tangible book value per share, and tangible common equity ratio are non-GAAP financial measures. For a reconciliation of these measures to the comparable GAAP financial measure or the computation of the measure, see "Non-GAAP Financial Measures and Reconciliations."
| As of | |||||||||||
| (dollars in thousands, except per share amounts) | March 31, 2026 | December 31, 2025 | |||||||||
| Selected balance sheet data: | |||||||||||
| Loans held for sale | $ | 4,692 | $ | 5,967 | |||||||
| Loans held for investment | 13,852,209 | 14,176,936 | |||||||||
| Allowance for credit losses on loans | (156,796) | (153,319) | |||||||||
| Investment securities | 5,296,688 | 5,379,535 | |||||||||
| Total assets | 21,388,955 | 22,351,475 | |||||||||
| Total deposits | 18,242,769 | 19,024,997 | |||||||||
| Total long-term debt | 128,815 | 192,014 | |||||||||
| Total shareholders' equity | 2,791,392 | 2,862,375 | |||||||||
| Other data: | |||||||||||
| Book value per share | $ | 12.61 | $ | 12.93 | |||||||
|
Tangible book value per share (1)
|
$ | 7.53 | $ | 7.81 | |||||||
| Common equity ratio | 13.05 | % | 12.81 | % | |||||||
|
Tangible common equity ratio (1)
|
8.57 | % | 8.48 | % | |||||||
| Loans to deposits ratio | 75.93 | % | 74.52 | % | |||||||
| Full time equivalent employees | 1,890 | 1,921 | |||||||||
| Credit quality: | |||||||||||
| Nonaccrual loans | $ | 44,379 | $ | 42,863 | |||||||
| Nonperforming assets to total assets | 0.25 | % | 0.23 | % | |||||||
| ACL to total loans | 1.13 | % | 1.08 | % | |||||||
|
ACL to nonaccrual loans
|
353.31 | % | 357.70 | % | |||||||
| Nonaccrual loans to total loans | 0.32 | % | 0.30 | % | |||||||
| Nonperforming assets | $ | 53,135 | $ | 51,796 | |||||||
| Regulatory capital ratios: | |||||||||||
|
Mechanics Bancorp:
|
|||||||||||
| Tier 1 leverage capital | 8.66 | % | 8.65 | % | |||||||
| Common equity Tier 1 capital | 13.92 | % | 14.09 | % | |||||||
| Tier 1 risk-based capital | 13.92 | % | 14.09 | % | |||||||
| Total risk based capital | 16.16 | % | 16.27 | % | |||||||
|
Mechanics Bank:
|
|||||||||||
| Tier 1 leverage capital | 9.31 | % | 9.58 | % | |||||||
| Common equity Tier 1 capital | 14.96 | % | 15.59 | % | |||||||
| Tier 1 risk-based capital | 14.96 | % | 15.59 | % | |||||||
| Total risk based capital | 16.21 | % | 16.81 | % | |||||||
(1) Return on average tangible equity, efficiency ratio (excluding the impact of intangibles amortization), tangible book value per share, and tangible common equity ratio are non-GAAP financial measures. For a reconciliation of these measures to the comparable GAAP financial measure or the computation of the measure, see "Non-GAAP Financial Measures and Reconciliations."
Management's Overview of Financial Performance
First Quarter of 2026 Compared to the Fourth Quarter of 2025
General: Our net income and income before taxes were $44.1 million and $61.9 million, respectively, for the first quarter of 2026 as compared to net income and net income before taxes of $111.2 million and $135.2 million, respectively, for the fourth quarter of 2025. The $73.3 million decrease in income before taxes compared to fourth quarter of 2025 was primarily due to a decrease in noninterest income due to the preliminary bargain purchase gain of $55.1 million in the fourth quarter of 2025 from the Merger. The decrease in income before taxes was also due to an increase in provision for credit losses driven primarily by an increase in provision of $6.5 million related to economic uncertainty and the potential impact of higher energy prices stemming from the conflict in the Middle East.
Income Taxes: Our effective tax rate during the first quarter of 2026 was 28.7% as compared to 17.8% in the fourth quarter of 2025 and our federal statutory rate was 21.0%. The effective tax rate increased compared to the prior quarter as a result of a $1.7 million remeasurement of deferred tax assets. In addition, the bargain purchase gain from the Merger, which is an after-tax item, was $55.1 million in the fourth quarter of 2025 and was the primary reason for the low effective tax rate in the fourth quarter of 2025.
Net Interest Income: The following table sets forth, for the periods indicated, information regarding (i) the total dollar amount of interest income from interest-earning assets and the resultant average yields on those assets; (ii) the total dollar amount of interest expense and the average rate of interest on our interest-bearing liabilities; (iii) net interest income; (iv) net interest rate spread; and (v) net interest margin. The average yields and rates are based on annualized interest income or expense for the periods presented.
| Quarter Ended | |||||||||||||||||||||||||||||||||||
| March 31, 2026 | December 31, 2025 | ||||||||||||||||||||||||||||||||||
| (dollars in thousands) |
Average Balance |
Interest |
Average
Yield/Cost (1)
|
Average Balance |
Interest |
Average
Yield/Cost (1)
|
|||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 549,799 | $ | 4,162 | 3.07 | % | $ | 1,094,743 | $ | 10,262 | 3.72 | % | |||||||||||||||||||||||
| Investment securities | 5,425,705 | 53,074 | 3.97 | % | 5,090,812 | 49,529 | 3.86 | % | |||||||||||||||||||||||||||
|
Loans (2), (3)
|
14,002,665 | 181,190 | 5.25 | % | 14,412,244 | 194,108 | 5.34 | % | |||||||||||||||||||||||||||
| FHLB stock and other investments | 146,776 | 3,510 | 9.70 | % | 149,275 | 2,756 | 7.33 | % | |||||||||||||||||||||||||||
|
Total interest-earning assets (3)
|
20,124,945 | 241,936 | 4.88 | % | 20,747,074 | 256,655 | 4.91 | % | |||||||||||||||||||||||||||
| Noninterest-earning assets | 1,697,660 | 1,686,765 | |||||||||||||||||||||||||||||||||
| Total assets | $ | 21,822,605 | $ | 22,433,839 | |||||||||||||||||||||||||||||||
| Liabilities and shareholders' equity: | |||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||||||||||||||
| Interest-bearing deposits: | |||||||||||||||||||||||||||||||||||
| Demand deposits | $ | 1,804,524 | $ | 2,176 | 0.49 | % | $ | 1,789,672 | $ | 2,815 | 0.62 | % | |||||||||||||||||||||||
| Money market and savings | 7,740,958 | 39,060 | 2.05 | % | 7,637,068 | 40,636 | 2.11 | % | |||||||||||||||||||||||||||
| Certificates of deposit | 2,472,421 | 17,087 | 2.80 | % | 3,089,704 | 25,516 | 3.28 | % | |||||||||||||||||||||||||||
| Total | 12,017,903 | 58,323 | 1.97 | % | 12,516,444 | 68,967 | 2.19 | % | |||||||||||||||||||||||||||
| Borrowings: | |||||||||||||||||||||||||||||||||||
| Borrowings | 24,667 | 228 | 3.75 | % | - | - | - | % | |||||||||||||||||||||||||||
| Long-term debt | 170,987 | 4,340 | 10.29 | % | 190,783 | 4,706 | 9.79 | % | |||||||||||||||||||||||||||
| Total interest-bearing liabilities | 12,213,557 | 62,891 | 2.09 | % | 12,707,227 | 73,673 | 2.30 | % | |||||||||||||||||||||||||||
| Noninterest-bearing liabilities: | |||||||||||||||||||||||||||||||||||
|
Demand deposits (4)
|
6,448,090 | 6,634,915 | |||||||||||||||||||||||||||||||||
| Other liabilities | 300,464 | 299,387 | |||||||||||||||||||||||||||||||||
| Total liabilities | 18,962,111 | 19,641,529 | |||||||||||||||||||||||||||||||||
| Shareholders' equity | 2,860,494 | 2,792,310 | |||||||||||||||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 21,822,605 | $ | 22,433,839 | |||||||||||||||||||||||||||||||
|
Net interest income (3)
|
$ | 179,045 | $ | 182,982 | |||||||||||||||||||||||||||||||
|
Net interest spread (3)
|
2.79 | % | 2.61 | % | |||||||||||||||||||||||||||||||
|
Net interest margin (3)
|
3.61 | % | 3.50 | % | |||||||||||||||||||||||||||||||
(1)Ratios are annualized.
(2)Includes loans held for sale.
(3)Prior period comparative disclosures for the fourth quarter of 2025 have been adjusted to reflect the impact of adoption of ASU 2025-08.
(4)Cost of deposits including noninterest-bearing deposits, was 1.28% and 1.43% for the quarter ended March 31, 2026 and December 31, 2025, respectively.
Net interest income in the first quarter of 2026 was $3.9 million lower than the fourth quarter of 2025 primarily as a result of a decrease in average interest earning assets of $622.1 million, partially offset by lower interest expense on certificates of deposit. Mechanics' net interest margin increased from 3.50% to 3.61% primarily due to lower cost of deposits from Federal Reserve rate cuts and runoff of higher cost certificates of deposit. In the first quarter of 2026, there was a 21 basis point reduction in the rates paid on interest-bearing liabilities, partially offset by a 3 basis point decrease on interest-earning asset yields. The decrease in rates paid on interest-bearing liabilities was primarily driven by the decrease in rates paid on
deposits after the Federal Reserve cut federal funds rates in 2025, and runoff of higher cost certificates of deposit. The slight decrease in earning asset yields was primarily driven by lower yields on loans, partially offset by higher yields on investment securities.
Provision for Credit Losses: The provision for credit losses in the first quarter of 2026, which consists of the provision for credit losses on loans and provision for unfunded commitments, was $7.8 million, compared to a reversal of provision of $3.2 million for the fourth quarter of 2025. Although net charge-offs were favorable and credit metrics remained strong, the provision in the first quarter of 2026 was driven primarily by an increase in provision of $6.5 million related to economic uncertainty and the potential impact of higher energy prices stemming from the conflict in the Middle East. The reversal of provision in the fourth quarter of 2025 was primarily due to lower loan balances due to repayments during the quarter.
Noninterest Income: The following table presents the components of noninterest income:
| Quarter Ended | |||||||||||
| (in thousands) | March 31, 2026 | December 31, 2025 | |||||||||
| Noninterest income | |||||||||||
| Service charges on deposit accounts | $ | 6,043 | $ | 6,360 | |||||||
| Trust fees and commissions | 3,070 | 3,565 | |||||||||
| ATM network fee income | 3,904 | 4,137 | |||||||||
| Loan servicing income | 1,927 | 1,873 | |||||||||
| Net gain on sales and calls of investment securities | 52 | 276 | |||||||||
| Income from bank-owned life insurance | 1,165 | 1,699 | |||||||||
| Bargain purchase gain | - | 55,097 | |||||||||
| Other | 4,859 | 5,514 | |||||||||
| Total noninterest income | $ | 21,020 | $ | 78,521 | |||||||
Loan servicing income, a component of noninterest income, consisted of the following:
| Quarter Ended | ||||||||||||||
| (in thousands) | March 31, 2026 | December 31, 2025 | ||||||||||||
| Single family servicing income, net: | ||||||||||||||
| Servicing fees and other | $ | 2,898 | $ | 2,993 | ||||||||||
|
Changes in fair value of single family MSRs - other (1)
|
(1,442) | (1,494) | ||||||||||||
| Net | 1,456 | 1,499 | ||||||||||||
| Risk management, single family MSRs: | ||||||||||||||
|
Changes in fair value due to assumptions (2)
|
702 | (221) | ||||||||||||
|
Net gain (loss) from economic hedging (3)
|
(886) | 250 | ||||||||||||
| Subtotal | (184) | 29 | ||||||||||||
| Single family servicing income | 1,272 | 1,528 | ||||||||||||
| Commercial loan servicing income: | ||||||||||||||
| Servicing fees and other | 2,293 | 2,388 | ||||||||||||
| Amortization of capitalized MSRs | (1,638) | (2,043) | ||||||||||||
| Subtotal | 655 | 345 | ||||||||||||
| Total loan servicing income | $ | 1,927 | $ | 1,873 | ||||||||||
(1)Represents changes due to collection/realization of expected cash flows and curtailments.
(2)Principally reflects changes in model assumptions, including prepayment speed assumptions, which are primarily affected by changes in mortgage interest rates.
(3)Comprised of net gains on derivatives used as economic hedges of single family MSRs, and net gains on U.S. Treasury notes trading securities used for hedging purposes.
Noninterest income in the first quarter of 2026 decreased from the fourth quarter of 2025 primarily due to the preliminary bargain purchase gain from the Merger of $55.1 million in the fourth quarter of 2025.
Noninterest Expense: The following table presents the components of noninterest expense:
| Quarter Ended | |||||||||||
| (in thousands) | March 31, 2026 | December 31, 2025 | |||||||||
| Noninterest expense | |||||||||||
| Salaries and employee benefits | $ | 68,550 | $ | 68,566 | |||||||
| Occupancy | 12,429 | 11,967 | |||||||||
| Equipment | 9,615 | 9,826 | |||||||||
| Professional services | 6,071 | 6,816 | |||||||||
| FDIC assessments and regulatory fees | 2,990 | 1,851 | |||||||||
| Amortization of intangible assets | 7,222 | 7,479 | |||||||||
| Data processing | 3,873 | 4,876 | |||||||||
| Loan related | 3,506 | 3,802 | |||||||||
| Marketing and advertising | 907 | 1,123 | |||||||||
| Other real estate owned related | 384 | (221) | |||||||||
| Acquisition and integration costs | 4,794 | 3,507 | |||||||||
| Other | 10,086 | 9,918 | |||||||||
| Total noninterest expense | $ | 130,427 | $ | 129,510 | |||||||
Noninterest expense increased $917 thousand in the first quarter of 2026 compared to the fourth quarter of 2025, primarily due to a slight increase in non-recurring acquisition and integration related costs from the Merger, which were $4.8 million in the first quarter of 2026 compared to $3.5 million in the fourth quarter of 2025.
First Quarter of 2026 Compared to the First Quarter of 2025
General: Our net income and income before taxes were $44.1 million and $61.9 million, respectively, for the first quarter of 2026 as compared to net income and net income before taxes of $43.8 million and $61.5 million, respectively, for the first quarter of 2025. The $416 thousand increase in income before taxes compared to the first quarter of 2025 was primarily due to an increase in net interest income and noninterest income from the Merger. The increases were partially offset by an increase in provision for credit losses and increases in noninterest expense from the Merger.
Income Taxes: Our effective tax rate for the first quarter of 2026 and 2025 was 28.7% and our federal statutory rate was 21.0%. The current quarter tax provision included a $1.7 million remeasurement of deferred tax assets.
Net Interest Income: The following table sets forth, for the periods indicated, information regarding (i) the total dollar amount of interest income from interest-earning assets and the resultant average yields on those assets; (ii) the total dollar amount of interest expense and the average rate of interest on our interest-bearing liabilities; (iii) net interest income; (iv) net interest rate spread; and (v) net interest margin. The average yields and rates are based on annualized interest income or expense for the periods presented.
| Quarter Ended March 31, | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||||||||
| (dollars in thousands) |
Average Balance |
Interest |
Average
Yield/Cost (1)
|
Average Balance |
Interest |
Average
Yield/Cost (1)
|
|||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 549,799 | $ | 4,162 | 3.07 | % | $ | 734,534 | $ | 7,187 | 3.97 | % | |||||||||||||||||||||||
| Investment securities | 5,425,705 | 53,074 | 3.97 | % | 4,781,791 | 47,585 | 4.04 | % | |||||||||||||||||||||||||||
|
Loans (2)
|
14,002,665 | 181,190 | 5.25 | % | 9,491,710 | 117,792 | 5.03 | % | |||||||||||||||||||||||||||
| FHLB stock and other investments | 146,776 | 3,510 | 9.70 | % | 101,230 | 1,021 | 4.09 | % | |||||||||||||||||||||||||||
| Total interest-earning assets | 20,124,945 | 241,936 | 4.88 | % | 15,109,265 | 173,585 | 4.66 | % | |||||||||||||||||||||||||||
| Noninterest-earning assets | 1,697,660 | 1,300,110 | |||||||||||||||||||||||||||||||||
| Total assets | $ | 21,822,605 | $ | 16,409,375 | |||||||||||||||||||||||||||||||
| Liabilities and shareholders' equity: | |||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||||||||||||||
| Interest-bearing deposits: | |||||||||||||||||||||||||||||||||||
| Demand deposits | $ | 1,804,524 | $ | 2,176 | 0.49 | % | $ | 1,403,053 | $ | 1,299 | 0.38 | % | |||||||||||||||||||||||
| Money market and savings | 7,740,958 | 39,060 | 2.05 | % | 6,051,918 | 38,140 | 2.56 | % | |||||||||||||||||||||||||||
| Certificates of deposit | 2,472,421 | 17,087 | 2.80 | % | 939,273 | 5,692 | 2.46 | % | |||||||||||||||||||||||||||
| Total | 12,017,903 | 58,323 | 1.97 | % | 8,394,244 | 45,131 | 2.18 | % | |||||||||||||||||||||||||||
| Borrowings: | |||||||||||||||||||||||||||||||||||
| Borrowings | 24,667 | 228 | 3.75 | % | - | - | - | % | |||||||||||||||||||||||||||
| Long-term debt | 170,987 | 4,340 | 10.29 | % | - | - | - | % | |||||||||||||||||||||||||||
| Total interest-bearing liabilities | 12,213,557 | 62,891 | 2.09 | % | 8,394,244 | 45,131 | 2.18 | % | |||||||||||||||||||||||||||
| Noninterest-bearing liabilities: | |||||||||||||||||||||||||||||||||||
|
Demand deposits (3)
|
6,448,090 | 5,442,140 | |||||||||||||||||||||||||||||||||
| Other liabilities | 300,464 | 238,223 | |||||||||||||||||||||||||||||||||
| Total liabilities | 18,962,111 | 14,074,607 | |||||||||||||||||||||||||||||||||
| Shareholders' equity | 2,860,494 | 2,334,768 | |||||||||||||||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 21,822,605 | $ | 16,409,375 | |||||||||||||||||||||||||||||||
|
Net interest income
|
$ | 179,045 | $ | 128,454 | |||||||||||||||||||||||||||||||
| Net interest spread | 2.79 | % | 2.48 | % | |||||||||||||||||||||||||||||||
| Net interest margin | 3.61 | % | 3.45 | % | |||||||||||||||||||||||||||||||
(1)Ratios are annualized.
(2)Includes loans held for sale.
(3)Cost of deposits including noninterest-bearing deposits, was 1.28% and 1.32% for the quarter ended March 31, 2026 and 2025, respectively.
Net interest income in the first quarter of 2026 increased $50.6 million as compared to the first quarter of 2025 due primarily to an increase in average interest-earning assets of $5.0 billion and an increase in net interest margin from 3.45% in the first quarter of 2025 to 3.61% in the first quarter of 2026, primarily as a result of the Merger. The increase in net interest margin is primarily due to a 9 basis point reduction in the rates paid on interest-bearing liabilities and a 22 basis point increase on interest-earning asset yields. The decrease in rates paid on interest-bearing liabilities was primarily driven by the decrease in rates paid on deposits after the Federal Reserve cut federal funds rates in 2025, partially offset by higher borrowing costs on debt assumed in the Merger. The increase in earning asset yields was primarily driven by loans acquired in the Merger, as well as higher yields on investment securities purchased in 2025.
Provision for Credit Losses: The provision for credit losses for loans and unfunded commitments was $7.8 million in the first quarter of 2026, compared to a $3.7 million reversal of provision in the first quarter of 2025. The increase in provision for the first quarter of 2026 was primarily driven by economic uncertainty and the potential impact of higher energy prices stemming from the conflict in the Middle East.
Noninterest Income: The following table presents the components of noninterest income:
| Quarter Ended | |||||||||||
| (in thousands) | March 31, 2026 | March 31, 2025 | |||||||||
| Noninterest income | |||||||||||
| Service charges on deposit accounts | $ | 6,043 | $ | 5,494 | |||||||
| Trust fees and commissions | 3,070 | 3,119 | |||||||||
| ATM network fee income | 3,904 | 2,888 | |||||||||
| Loan servicing income | 1,927 | 177 | |||||||||
| Net gain on sales and calls of investment securities | 52 | - | |||||||||
| Income from bank-owned life insurance | 1,165 | 527 | |||||||||
| Other | 4,859 | 2,776 | |||||||||
| Total noninterest income | $ | 21,020 | $ | 14,981 | |||||||
Loan servicing income, a component of noninterest income, consisted of the following:
| Quarter Ended | |||||||||||
| (in thousands) | March 31, 2026 | March 31, 2025 | |||||||||
| Single family servicing income, net: | |||||||||||
| Servicing fees and other | $ | 2,898 | $ | 138 | |||||||
|
Changes in fair value of single family MSRs - other (1)
|
(1,442) | - | |||||||||
| Net | 1,456 | 138 | |||||||||
| Risk management, single family MSRs: | |||||||||||
|
Changes in fair value due to assumptions (2)
|
702 | - | |||||||||
|
Net gain (loss) from economic hedging (3)
|
(886) | - | |||||||||
| Subtotal | (184) | - | |||||||||
| Single family servicing income | 1,272 | 138 | |||||||||
| Commercial loan servicing income: | |||||||||||
| Servicing fees and other | 2,293 | 39 | |||||||||
| Amortization of capitalized MSRs | (1,638) | - | |||||||||
| Subtotal | 655 | 39 | |||||||||
| Total loan servicing income | $ | 1,927 | $ | 177 | |||||||
(1)Represents changes due to collection/realization of expected cash flows and curtailments.
(2)Principally reflects changes in model assumptions, including prepayment speed assumptions, which are primarily affected by changes in mortgage interest rates.
(3)Comprised of net gains on derivatives used as economic hedges of single family MSRs, and net gains on U.S. Treasury notes trading securities used for hedging purposes.
Noninterest income for the first quarter of 2026 increased from the first quarter of 2025 primarily due to higher loan servicing income and higher other noninterest income, both of which were driven by the Merger.
Noninterest Expense consisted of the following:
| Quarter Ended | |||||||||||
| (in thousands) | March 31, 2026 | March 31, 2025 | |||||||||
| Noninterest expense | |||||||||||
| Salaries and employee benefits | $ | 68,550 | $ | 48,851 | |||||||
| Occupancy | 12,429 | 7,972 | |||||||||
| Equipment | 9,615 | 5,869 | |||||||||
| Professional services | 6,071 | 4,916 | |||||||||
| FDIC assessments and regulatory fees | 2,990 | 2,213 | |||||||||
| Amortization of intangible assets | 7,222 | 2,738 | |||||||||
| Data processing | 3,873 | 1,350 | |||||||||
| Loan related | 3,506 | 1,577 | |||||||||
| Marketing and advertising | 907 | 584 | |||||||||
| Other real estate owned related | 384 | 2,684 | |||||||||
| Acquisition and integration costs | 4,794 | 350 | |||||||||
| Other | 10,086 | 6,534 | |||||||||
| Total noninterest expense | $ | 130,427 | $ | 85,638 | |||||||
Noninterest expense increased $44.8 million for the first quarter of 2026 compared to the first quarter of 2025. The increase in noninterest expense was mainly driven by higher salaries and employee benefits expense, occupancy costs, amortization of intangibles and acquisition and integration related costs from the Merger.
Financial Condition March 31, 2026 compared to December 31, 2025
During the first quarter of 2026, total assets decreased $962.5 million, total liabilities decreased $891.5 million and shareholders' equity decreased $71.0 million.
Investment Securities
Trading securities totaled $49.5 million at March 31, 2026 and December 31, 2025. Securities available-for-sale decreased by $59.7 million during the first quarter of 2026 to $3.9 billion at March 31, 2026, primarily due to paydowns and declines in fair values. Securities held-to-maturity decreased by $23.1 million in the first quarter of 2026, due to paydowns, and totaled $1.3 billion at March 31, 2026.
Loans
Total loans at March 31, 2026 were $13.9 billion, a decrease of $324.7 million from $14.2 billion at December 31, 2025, due primarily to loan repayments during the quarter.
Deposits
Total deposits decreased by $782.2 million during the first quarter of 2026 to $18.2 billion at March 31, 2026, due primarily to maturities of certificates of deposits acquired in the Merger, as well as seasonal outflows in noninterest-bearing demand deposits.
Noninterest-bearing demand deposits totaled $6.5 billion and represented 36% of total deposits at March 31, 2026, compared to $6.7 billion, or 35% of total deposits, at December 31, 2025.
Insured deposits of $10.8 billion represented 59% of total deposits at March 31, 2026, compared to insured deposits of $12.2 billion, or 64% of total deposits at December 31, 2025.
Borrowings
Total borrowings were $128.8 million at March 31, 2026, compared to $192.0 million at December 31, 2025. The decrease in the first quarter of 2026 was due to the redemption of the $65.0 million Senior Notes on March 1, 2026.
Equity
During the first quarter of 2026, total shareholders' equity decreased by $71.0 million to $2.8 billion and tangible common equity (1) decreased by $63.8 million to $1.7 billion at March 31, 2026. The decrease in total shareholders' equity for the first quarter of 2026 primarily resulted from a net decrease in retained earnings in the first quarter of 2026 from net income, less dividends paid to common shareholders, and a decrease in accumulated other comprehensive income due to changes in fair value of securities available-for-sale.
At March 31, 2026, book value per common share decreased to $12.61, compared to $12.93 at December 31, 2025. At March 31, 2026, tangible book value per common share (1) decreased to $7.53, compared to $7.81 at December 31, 2025. The decrease in book value per common share and tangible book value per common share for the first quarter of 2026 primarily resulted from a net decrease in retained earnings in the first quarter of 2026 from net income, less dividends paid to common shareholders, and a decrease in accumulated other comprehensive income due to changes in fair value of securities available-for-sale.
(1) Tangible common equity and tangible book value per share are non-GAAP financial measures. For a reconciliation of these measures to the comparable GAAP financial measure or the computation of the measure, see "Non-GAAP Financial Measures and Reconciliations."
Debt Securities
Debt securities AFS and HTM are as follows:
| March 31, 2026 | December 31, 2025 | ||||||||||||||||||||||
| (in thousands) | Amortized Cost | Fair Value | Amortized Cost | Fair Value | |||||||||||||||||||
| Securities available-for-sale | |||||||||||||||||||||||
| Obligations of states and political subdivisions | $ | 454,978 | $ | 459,869 | $ | 458,290 | $ | 471,159 | |||||||||||||||
| Mortgage-backed securities - residential | 2,818,727 | 2,807,719 | 2,871,733 | 2,884,289 | |||||||||||||||||||
| Mortgage-backed securities - commercial | 369,056 | 357,981 | 381,934 | 371,806 | |||||||||||||||||||
| Collateralized loan obligations | 230,500 | 229,708 | 188,500 | 188,316 | |||||||||||||||||||
| Corporate bonds | 52,028 | 51,135 | 51,828 | 49,915 | |||||||||||||||||||
| U.S. Treasury securities | 20,648 | 20,536 | 20,623 | 20,669 | |||||||||||||||||||
| Agency debentures | 6,816 | 6,757 | 7,243 | 7,231 | |||||||||||||||||||
| Total securities available-for-sale | 3,952,753 | 3,933,705 | 3,980,151 | 3,993,385 | |||||||||||||||||||
| Securities held-to-maturity | |||||||||||||||||||||||
| Obligations of states and political subdivisions | 12,967 | 13,359 | 12,902 | 13,441 | |||||||||||||||||||
| Mortgage-backed securities - residential | 989,514 | 857,370 | 1,012,716 | 877,722 | |||||||||||||||||||
| Mortgage-backed securities - commercial | 311,039 | 279,240 | 311,014 | 279,655 | |||||||||||||||||||
| Total securities held-to-maturity | 1,313,520 | 1,149,969 | 1,336,632 | 1,170,818 | |||||||||||||||||||
| Total AFS and HTM debt securities | $ | 5,266,273 | $ | 5,083,674 | $ | 5,316,783 | $ | 5,164,203 | |||||||||||||||
In addition to AFS and HTM securities, the Company held $49.5 million of trading securities at March 31, 2026 and December 31, 2025, consisting of U.S. Treasury notes used as economic hedges of our single family mortgage servicing rights, which are carried at fair value and reported as trading securities on the consolidated balance sheets.
The fair value of available-for-sale securities and the amortized cost of held-to-maturity debt securities are shown by contractual maturities and weighted average yields in the following table:
| March 31, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| One Year Or Less | More than One to Five Years | More than Five Years to Ten Years | More than Ten Years | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | Amount |
Weighted Average
Yield (1)
|
Amount |
Weighted Average
Yield (1)
|
Amount |
Weighted Average
Yield (1)
|
Amount |
Weighted Average
Yield (1)
|
Amount |
Weighted Average
Yield (1)
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| Securities available-for-sale | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Obligations of states and political subdivisions | $ | 342 | 2.49 | % | $ | 44,871 | 3.81 | % | $ | 125,131 | 3.77 | % | $ | 289,525 | 4.35 | % | $ | 459,869 | 4.13 | % | |||||||||||||||||||||||||||||||||||||||
| Mortgage-backed securities - residential | 376 | 1.92 | % | 12,295 | 2.13 | % | 23,170 | 2.29 | % | 2,771,878 | 4.94 | % | 2,807,719 | 4.91 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Mortgage-backed securities - commercial | 2,600 | 2.43 | % | 196,499 | 2.85 | % | 143,676 | 4.59 | % | 15,206 | 4.08 | % | 357,981 | 3.58 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Collateralized loan obligations | - | - | % | - | - | % | - | - | % | 229,708 | 5.13 | % | 229,708 | 5.13 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Corporate bonds | - | - | % | 4,302 | 25.39 | % | 46,833 | 4.48 | % | - | - | % | 51,135 | 6.13 | % | ||||||||||||||||||||||||||||||||||||||||||||
| U.S. Treasury securities | - | - | % | 20,536 | 3.60 | % | - | - | % | - | - | % | 20,536 | 3.60 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Agency debentures | - | - | % | 1,109 | 3.87 | % | 3,501 | 4.24 | % | 2,147 | 4.67 | % | 6,757 | 4.32 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Total securities available-for-sale | 3,318 | 2.38 | % | 279,612 | 3.32 | % | 342,311 | 4.07 | % | 3,308,464 | 4.95 | % | 3,933,705 | 4.71 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Securities held-to-maturity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Obligations of states and political subdivisions | 3,500 | 0.73 | % | 3,106 | 4.09 | % | 4,708 | 4.34 | % | 1,653 | 7.88 | % | 12,967 | 3.76 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Mortgage-backed securities - residential | - | - | % | 53 | 2.49 | % | - | - | % | 989,461 | 1.78 | % | 989,514 | 1.78 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Mortgage-backed securities - commercial | - | - | % | 179,638 | 1.75 | % | 131,401 | 1.84 | % | - | - | % | 311,039 | 1.79 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Total securities held-to-maturity | 3,500 | 0.73 | % | 182,797 | 1.10 | % | 136,109 | 0.82 | % | 991,114 | 1.79 | % | 1,313,520 | 1.80 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Total AFS and HTM debt securities | $ | 6,818 | 1.53 | % | $ | 462,409 | 2.78 | % | $ | 478,420 | 3.37 | % | $ | 4,299,578 | 4.18 | % | $ | 5,247,225 | 3.98 | % | |||||||||||||||||||||||||||||||||||||||
(1)Weighted-average yields are calculated based on the contractual coupon, including amortization of premiums and accretion of discounts, weighted by amortized cost.
Loans
The composition of our LHFI portfolio is as follows:
| (in thousands) | March 31, 2026 | December 31, 2025 | |||||||||
| Commercial and industrial | $ | 460,081 | $ | 482,170 | |||||||
| Commercial real estate | |||||||||||
| Multifamily | 5,291,597 | 5,355,252 | |||||||||
| Non-owner occupied | 1,711,611 | 1,740,277 | |||||||||
| Owner occupied | 586,698 | 689,079 | |||||||||
| Construction and land development | 399,546 | 493,992 | |||||||||
| Residential real estate | 4,017,120 | 3,970,803 | |||||||||
| Auto | 639,825 | 791,012 | |||||||||
| Other consumer | 745,731 | 654,351 | |||||||||
| Total LHFI | 13,852,209 | 14,176,936 | |||||||||
|
ACL
|
(156,796) | (153,319) | |||||||||
| Total LHFI less ACL | $ | 13,695,413 | $ | 14,023,617 | |||||||
The following table shows the contractual maturity of our loan portfolio by loan type:
| March 31, 2026 | |||||||||||||||||||||||||||||||||||||||||
|
Loans due after one year
by rate characteristic
|
|||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Within one year |
Due after
one year through
five years
|
Due after
five through fifteen
years
|
Due after fifteen
years
|
Total |
Fixed-
rate
|
Adjustable-
rate
|
||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | 170,986 | $ | 153,679 | $ | 123,511 | $ | 11,905 | $ | 460,081 | $ | 206,359 | $ | 82,736 | |||||||||||||||||||||||||||
| Commercial real estate | |||||||||||||||||||||||||||||||||||||||||
| Multifamily | 64,455 | 158,567 | 3,053,288 | 2,015,287 | 5,291,597 | 192,363 | 5,034,779 | ||||||||||||||||||||||||||||||||||
| Non-owner occupied | 437,044 | 634,081 | 640,486 | - | 1,711,611 | 849,211 | 425,356 | ||||||||||||||||||||||||||||||||||
| Owner occupied | 50,949 | 214,973 | 264,346 | 56,430 | 586,698 | 422,161 | 113,588 | ||||||||||||||||||||||||||||||||||
| Construction and land | 304,971 | 62,066 | 10,336 | 22,173 | 399,546 | 26,975 | 67,600 | ||||||||||||||||||||||||||||||||||
| Residential real estate | 7,539 | 24,542 | 186,473 | 3,798,566 | 4,017,120 | 2,019,452 | 1,990,129 | ||||||||||||||||||||||||||||||||||
| Auto | 57,405 | 582,393 | 27 | - | 639,825 | 582,420 | - | ||||||||||||||||||||||||||||||||||
| Other consumer | 702,531 | 12,606 | 17,442 | 13,152 | 745,731 | 41,548 | 1,652 | ||||||||||||||||||||||||||||||||||
|
Total LHFI
|
$ | 1,795,880 | $ | 1,842,907 | $ | 4,295,909 | $ | 5,917,513 | $ | 13,852,209 | $ | 4,340,489 | $ | 7,715,840 | |||||||||||||||||||||||||||
The following table shows the activity in loan balances:
| Quarter Ended | |||||||||||
| (in thousands) | March 31, 2026 | March 31, 2025 | |||||||||
| Loans - beginning of period | $ | 14,176,936 | $ | 9,643,497 | |||||||
| Originations and advances | 569,231 | 337,379 | |||||||||
| Purchases | 3,478 | 29,230 | |||||||||
| Loans sold | (7,600) | - | |||||||||
| Payoffs, paydowns and other | (882,631) | (581,865) | |||||||||
| Charge-offs | (7,205) | (12,217) | |||||||||
| Loans - end of period | $ | 13,852,209 | $ | 9,416,024 | |||||||
The following table shows loan originations and advances:
| Quarter Ended | |||||||||||
| (in thousands) | March 31, 2026 | March 31, 2025 | |||||||||
| Commercial and industrial | $ | 101,424 | $ | 76,208 | |||||||
| Commercial real estate | |||||||||||
| Multifamily | 23,864 | 65,254 | |||||||||
| Non-owner occupied | 4,194 | 2,328 | |||||||||
| Owner occupied | 5,797 | 6,502 | |||||||||
| Construction and land development | 72,389 | 25,687 | |||||||||
| Residential real estate | 186,891 | 94,860 | |||||||||
| Other consumer | 174,672 | 66,540 | |||||||||
| Total | $ | 569,231 | $ | 337,379 | |||||||
Credit Risk Management: Delinquent Loans, Nonperforming Assets and Provision for Credit Losses
Asset Quality Information and Ratios
| (dollars in thousands) | March 31, 2026 | December 31, 2025 | |||||||||
| Delinquent loans held for investment: | |||||||||||
| 30-89 days past due | $ | 43,556 | $ | 58,459 | |||||||
| 90+ days past due | 33,447 | 34,686 | |||||||||
| Total delinquent loans | $ | 77,003 | $ | 93,145 | |||||||
| Total delinquent loans to loans held for investment | 0.56 | % | 0.66 | % | |||||||
| Nonperforming assets: | |||||||||||
| Nonaccrual loans | $ | 44,379 | $ | 42,863 | |||||||
| 90+ days past due and accruing | 4,098 | 3,943 | |||||||||
| Total nonperforming loans | 48,477 | 46,806 | |||||||||
| Foreclosed assets | 4,658 | 4,990 | |||||||||
| Total nonperforming assets | $ | 53,135 | $ | 51,796 | |||||||
| Allowance for credit losses on loans | $ | 156,796 | $ | 153,319 | |||||||
| Allowance for credit losses on loans to total loans held for investment | 1.13 | % | 1.08 | % | |||||||
| Allowance for credit losses on loans to nonaccrual loans | 353.31 | % | 357.70 | % | |||||||
| Nonaccrual loans to total loans held for investment | 0.32 | % | 0.30 | % | |||||||
| Nonperforming assets to total assets | 0.25 | % | 0.23 | % | |||||||
At March 31, 2026, total delinquent loans were $77.0 million, compared to $93.1 million at December 31, 2025. The decrease was primarily due to improvement in auto loan portfolio delinquencies. Total delinquent loans as a percentage of total loans declined to 0.56% at March 31, 2026, as compared to 0.66% at December 31, 2025.
At March 31, 2026, nonperforming assets were $53.1 million, compared to $51.8 million at December 31, 2025. The slight increase was primarily due to a commercial real estate loan that was modified and was placed on nonaccrual status. Nonperforming assets as a percentage of total assets increased to 0.25% at March 31, 2026 as compared to 0.23% at December 31, 2025.
Delinquent, nonaccrual and current loans by loan type consisted of the following:
| March 31, 2026 | |||||||||||||||||||||||||||||||||||||||||
| Past Due and Still Accruing | |||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) |
30-59 days |
60-89 days |
90 days or
more
|
Nonaccrual |
Total past
due and nonaccrual
|
Current | Total loans | ||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | 956 | $ | 52 | $ | - | $ | 11,698 | $ | 12,706 | $ | 447,375 | $ | 460,081 | |||||||||||||||||||||||||||
| Commercial real estate | |||||||||||||||||||||||||||||||||||||||||
| Multifamily | - | - | - | - | - | 5,291,597 | 5,291,597 | ||||||||||||||||||||||||||||||||||
| Non-owner occupied | - | - | - | 17,024 | 17,024 | 1,694,587 | 1,711,611 | ||||||||||||||||||||||||||||||||||
| Owner occupied | - | - | - | 722 | 722 | 585,976 | 586,698 | ||||||||||||||||||||||||||||||||||
| Construction and land development | - | - | - | 3,225 | 3,225 | 396,321 | 399,546 | ||||||||||||||||||||||||||||||||||
| Residential real estate | 13,776 | 1,932 | 4,098 | 8,177 | 27,983 | 3,989,137 | 4,017,120 | ||||||||||||||||||||||||||||||||||
| Auto | 18,976 | 3,808 | - | 3,529 | 26,313 | 613,512 | 639,825 | ||||||||||||||||||||||||||||||||||
| Other consumer | 272 | 152 | - | 4 | 428 | 745,303 | 745,731 | ||||||||||||||||||||||||||||||||||
| Total loans | $ | 33,980 | $ | 5,944 | $ | 4,098 | $ | 44,379 | $ | 88,401 | $ | 13,763,808 | $ | 13,852,209 | |||||||||||||||||||||||||||
| % | 0.25 | % | 0.04 | % | 0.03 | % | 0.32 | % | 0.64 | % | 99.36 | % | 100.00 | % | |||||||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||||||||||||||||||||
| Past Due and Still Accruing | |||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) |
30-59 days |
60-89 days |
90 days or
more
|
Nonaccrual |
Total past
due and nonaccrual
|
Current | Total loans | ||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | 3,276 | $ | 315 | $ | - | $ | 11,196 | $ | 14,787 | $ | 467,383 | $ | 482,170 | |||||||||||||||||||||||||||
| Commercial real estate | |||||||||||||||||||||||||||||||||||||||||
| Multifamily | - | - | - | 3,387 | 3,387 | 5,351,865 | 5,355,252 | ||||||||||||||||||||||||||||||||||
| Non-owner occupied | 50 | - | - | 12,539 | 12,589 | 1,727,688 | 1,740,277 | ||||||||||||||||||||||||||||||||||
| Owner occupied | - | 176 | - | 1,870 | 2,046 | 687,033 | 689,079 | ||||||||||||||||||||||||||||||||||
| Construction and land development | - | - | - | 2,962 | 2,962 | 491,030 | 493,992 | ||||||||||||||||||||||||||||||||||
| Residential real estate | 13,293 | 4,558 | 3,943 | 6,765 | 28,559 | 3,942,244 | 3,970,803 | ||||||||||||||||||||||||||||||||||
| Auto | 25,895 | 6,547 | - | 4,143 | 36,585 | 754,427 | 791,012 | ||||||||||||||||||||||||||||||||||
| Other consumer | 289 | 149 | - | 1 | 439 | 653,912 | 654,351 | ||||||||||||||||||||||||||||||||||
| Total loans | $ | 42,803 | $ | 11,745 | $ | 3,943 | $ | 42,863 | $ | 101,354 | $ | 14,075,582 | $ | 14,176,936 | |||||||||||||||||||||||||||
| % | 0.30 | % | 0.08 | % | 0.03 | % | 0.30 | % | 0.71 | % | 99.29 | % | 100.00 | % | |||||||||||||||||||||||||||
Management considers the current level of the allowance for credit losses on loans to be appropriate to cover estimated lifetime losses within our LHFI portfolio. For additional information on the Company's allowance for credit losses, refer to Note 4, "Loans and Credit Quality."
The following table presents the amount of allowance for credit losses on loans by product type, as well as the percentage of each respective portfolio's loan balance to total loans:
| March 31, 2026 | December 31, 2025 | ||||||||||||||||||||||
| (dollars in thousands) | Balance |
Loan balance % to total loans
|
Balance |
Loan balance % to total loans
|
|||||||||||||||||||
| Commercial and industrial | $ | 8,860 | 3.3 | % | $ | 8,417 | 3.4 | % | |||||||||||||||
| Commercial real estate | 120,758 | 57.7 | % | 114,326 | 58.4 | % | |||||||||||||||||
| Residential real estate | 13,621 | 29.0 | % | 13,294 | 28.0 | % | |||||||||||||||||
| Auto | 11,446 | 4.6 | % | 15,003 | 5.6 | % | |||||||||||||||||
| Other consumer | 2,111 | 5.4 | % | 2,279 | 4.6 | % | |||||||||||||||||
| Total ACL | $ | 156,796 | 100.0 | % | $ | 153,319 | 100.0 | % | |||||||||||||||
As of March 31, 2026, the expected loss rates increased when compared to December 31, 2025 due to higher forecasted product risk metrics in certain geographically concentrated areas, partially offset by runoff of the auto, non-owner occupied commercial real estate, and construction and land development portfolios. During the quarter ended March 31, 2026, the qualitative factors primarily increased due to economic uncertainty and the potential impact of higher energy prices stemming from the conflict in the Middle East.
The following table presents net charge-offs for the loan portfolio for the dates indicated:
| Quarter Ended | |||||||||||||||||||||||||||||||||||
| March 31, 2026 | March 31, 2025 | ||||||||||||||||||||||||||||||||||
| (dollars in thousands) | Net loan charge-offs (recoveries) | Average balance |
Net loan charge-offs to average loans (1)
|
Net loan charge-offs (recoveries) | Average balance |
Net loan charge-offs to average loans (1)
|
|||||||||||||||||||||||||||||
| Commercial and industrial | $ | (35) | $ | 471,421 | (0.03) | % | $ | 114 | $ | 375,603 | 0.12 | % | |||||||||||||||||||||||
| Commercial real estate | (111) | 8,131,888 | (0.01) | % | - | 4,893,279 | 0.00 | % | |||||||||||||||||||||||||||
| Residential real estate | (353) | 3,987,440 | (0.04) | % | - | 2,302,223 | 0.00 | % | |||||||||||||||||||||||||||
| Auto | 4,122 | 714,681 | 2.34 | % | 8,718 | 1,479,713 | 2.39 | % | |||||||||||||||||||||||||||
| Other consumer | 493 | 681,837 | 0.29 | % | 459 | 440,223 | 0.42 | % | |||||||||||||||||||||||||||
| Total | $ | 4,116 | $ | 13,987,267 | 0.12 | % | $ | 9,291 | $ | 9,491,041 | 0.40 | % | |||||||||||||||||||||||
(1) Ratios are annualized.
Deposits
Deposit balances and weighted average rates were as follows for the periods indicated:
| March 31, 2026 | December 31, 2025 | ||||||||||||||||||||||
| (dollars in thousands) | Amount | Weighted Average Rate | Amount | Weighted Average Rate | |||||||||||||||||||
| Deposits by product: | |||||||||||||||||||||||
| Noninterest-bearing demand deposits | $ | 6,511,998 | - | % | $ | 6,744,082 | - | % | |||||||||||||||
| Interest-bearing: | |||||||||||||||||||||||
| Interest-bearing demand deposits | 1,767,403 | 0.40 | % | 1,878,468 | 0.75 | % | |||||||||||||||||
| Savings | 1,363,137 | 0.02 | % | 1,367,475 | 0.03 | % | |||||||||||||||||
| Money market | 6,455,561 | 2.50 | % | 6,250,364 | 2.41 | % | |||||||||||||||||
| Certificates of deposit | 2,144,670 | 2.44 | % | 2,784,608 | 3.01 | % | |||||||||||||||||
| Total interest-bearing deposits | 11,730,771 | 1.89 | % | 12,280,915 | 2.00 | % | |||||||||||||||||
| Total deposits | $ | 18,242,769 | 1.21 | % | $ | 19,024,997 | 1.29 | % | |||||||||||||||
| Uninsured deposits | $ | 7,456,727 | $ | 6,825,674 | |||||||||||||||||||
The following table presents the schedule of maturities of certificates of deposit as of March 31, 2026:
| (in thousands) | Three Months or Less | Over Three Months through Six Months | Over Six Months through Twelve Months | Over Twelve Months | Total | ||||||||||||||||||||||||
| Time deposits of $250 thousand or less | $ | 880,896 | $ | 517,591 | $ | 207,560 | $ | 44,150 | $ | 1,650,197 | |||||||||||||||||||
| Time deposits greater than $250 thousand | 236,914 | 144,960 | 105,497 | 7,102 | 494,473 | ||||||||||||||||||||||||
| Total | $ | 1,117,810 | $ | 662,551 | $ | 313,057 | $ | 51,252 | $ | 2,144,670 | |||||||||||||||||||
Liquidity and Sources of Funds
Liquidity risk management is primarily intended to ensure we are able to maintain sources of cash to adequately fund operations and meet our obligations, including demands from depositors, draws on lines of credit and paying any creditors, on a timely and cost-effective basis, in various market conditions. Our liquidity profile is influenced by changes in market conditions, the composition of the balance sheet and risk tolerance levels. Mechanics has established liquidity guidelines and operating plans that detail the sources and uses of cash and liquidity.
Mechanics' primary sources of liquidity include deposits, loan repayments and investment securities payments, both principal and interest, borrowings, and proceeds from the sale of loans and investment securities. Borrowings may include advances from the FHLB, borrowings from the Federal Reserve, federal funds purchased and borrowings from other financial institutions. While scheduled principal repayments on loans and investment securities are a relatively predictable source of funds, deposit inflows and outflows and prepayments of loans and investment securities are greatly influenced by interest rates, economic conditions and competition.
Mechanics' contractual cash flow obligations include the maturity of certificates of deposit, short-term and long-term borrowings, interest on certificates of deposit and borrowings, operating leases and fees for information technology-related services and professional services. Obligations for certificates of deposit are typically satisfied through excess cash reserve balances, the renewal of these instruments or the generation of new deposits. Interest payments and obligations related to leases and services are typically met by cash generated from our operations.
At March 31, 2026, Mechanics had available borrowing capacity of $6.1 billion from the FHLB, $4.2 billion from the Federal Reserve and $5.1 billion under borrowing lines established with other financial institutions. We believe that our current unrestricted cash and cash equivalents, cash flows from operations and borrowing capacity will be sufficient to meet our liquidity needs for at least the next 12 months. We are currently not aware of any other trends or demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in our liquidity increasing or decreasing in any material way that will impact our liquidity needs during or beyond the next 12 months.
Cash Flows
For the first quarter of 2026, cash and cash equivalents decreased by $546.5 million compared to a decrease of $201.4 million during the first quarter of 2025. As a banking institution, Mechanics has extensive access to liquidity. Mechanics manages its cash positions to conservative minimum cash buffer levels and does not attempt to maximize the level of cash and cash equivalents. The following discussion highlights the major activities and transactions that affected our cash flows during these periods.
Cash flows from operating activities
Mechanics' operating assets and liabilities are used to support our lending activities, including the origination and sale of mortgage loans. For the first quarter of 2026, net cash of $11.4 million was provided by operating activities from ongoing bank operations, compared to $1.4 million used in operating activities in the first quarter of 2025.
Cash flows from investing activities
Mechanics' investing activities are primarily related to investment securities and LHFI. For the first quarter of 2026, net cash of $381.8 million was provided by investing activities primarily from AFS investment security maturities and calls, net loan originations and principal collections, partially offset by AFS investment security purchases. For the first quarter of 2025, net cash of $244.4 million was used by investing activities primarily from AFS investment security purchases, partially offset by net loan originations and principal collections.
Cash flows from financing activities
Mechanics' financing activities are primarily related to deposits, net proceeds or repayments from borrowings and equity transactions. For the first quarter of 2026, net cash of $939.7 million was used by financing activities, due to a decrease in deposits, repayment of Senior Notes and dividends paid. For the first quarter of 2025, net cash of $44.4 million was provided by financing activities due to an increase in deposits.
Off-Balance Sheet Arrangements
In the normal course of business, we are a party to financial instruments that carry off-balance sheet risk. These financial instruments (which include commitments to originate loans and commitments to purchase loans) include potential credit risk in excess of the amount recognized in the accompanying consolidated financial statements. These transactions are designed to (1) meet the financial needs of our customers, (2) manage our credit, market or liquidity risks, (3) diversify our funding sources and/or (4) optimize capital.
These commitments include the following:
| (in thousands) | March 31, 2026 | December 31, 2025 | |||||||||
| Unused consumer portfolio lines | $ | 832,068 | $ | 835,480 | |||||||
|
Commercial portfolio lines (1)
|
1,410,402 | 1,355,452 | |||||||||
| Commitments to fund loans | 36,222 | 11,830 | |||||||||
| Total | $ | 2,278,692 | $ | 2,202,762 | |||||||
| Standby letters of credit | $ | 27,411 | $ | 17,257 | |||||||
(1)Within the commercial portfolio lines, undistributed construction loan proceeds, where the Company has an obligation to advance funds for construction progress payments were $308.4 million and $361.4 million at March 31, 2026 and December 31, 2025, respectively.
Capital Resources
The capital rules applicable to United States based bank holding companies and federally insured depository institutions require Mechanics Bancorp and Mechanics Bank to meet specific capital adequacy requirements that, for the most part, involve quantitative measures, primarily in terms of the ratios of their capital to their assets, liabilities, and certain off-balance sheet items, calculated under regulatory accounting practices. In addition, prompt corrective action regulations place a federally insured depository institution, such as Mechanics Bank, into one of five capital categories on the basis of its capital ratios: (i) well capitalized; (ii) adequately capitalized; (iii) undercapitalized; (iv) significantly undercapitalized; or (v) critically undercapitalized. A depository institution's primary federal regulatory agency may determine that, based on certain qualitative assessments, the depository institution should be assigned to a lower capital category than the one indicated by its capital ratios. At each successive lower capital category, a depository institution is subject to greater operating restrictions and increased regulatory supervision by its federal bank regulatory agency.
The following tables present the regulatory capital amounts and ratios (inclusive of the capital 2.5% conservation buffer, where applicable) for Mechanics Bancorp and Mechanics Bank as of the dates indicated:
| At March 31, 2026 | |||||||||||||||||||||||||||||||||||
| Actual |
For Minimum Capital Adequacy Purposes (including Capital Conservation Buffer) |
To Be Categorized As "Well Capitalized" |
|||||||||||||||||||||||||||||||||
| (dollars in thousands) | Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||||||||||||
| Mechanics Bancorp | |||||||||||||||||||||||||||||||||||
| Tier 1 leverage capital (to average assets) | $ | 1,800,026 | 8.66 | % | $ | 831,621 | 4.0 | % | n/a | n/a | |||||||||||||||||||||||||
| Common equity Tier 1 capital (to risk-weighted assets) | 1,800,026 | 13.92 | % | 905,344 | 7.0 | % | n/a | n/a | |||||||||||||||||||||||||||
| Tier 1 risk-based capital (to risk-weighted assets) | 1,800,026 | 13.92 | % | 1,099,347 | 8.5 | % | n/a | n/a | |||||||||||||||||||||||||||
| Total risk-based capital (to risk-weighted assets) | 2,090,540 | 16.16 | % | 1,358,016 | 10.5 | % | n/a | n/a | |||||||||||||||||||||||||||
| Mechanics Bank | |||||||||||||||||||||||||||||||||||
| Tier 1 leverage capital (to average assets) | $ | 1,936,097 | 9.31 | % | $ | 832,148 | 4.0 | % | $ | 1,040,184 | 5.0 | % | |||||||||||||||||||||||
| Common equity Tier 1 capital (to risk-weighted assets) | 1,936,097 | 14.96 | % | 906,162 | 7.0 | % | 841,436 | 6.5 | % | ||||||||||||||||||||||||||
| Tier 1 risk-based capital (to risk-weighted assets) | 1,936,097 | 14.96 | % | 1,100,340 | 8.5 | % | 1,035,614 | 8.0 | % | ||||||||||||||||||||||||||
| Total risk-based capital (to risk-weighted assets) | 2,097,940 | 16.21 | % | 1,359,243 | 10.5 | % | 1,294,517 | 10.0 | % | ||||||||||||||||||||||||||
| At December 31, 2025 | |||||||||||||||||||||||||||||||||||
| Actual |
For Minimum Capital Adequacy Purposes (including Capital Conservation Buffer) |
To Be Categorized As "Well Capitalized" |
|||||||||||||||||||||||||||||||||
| (dollars in thousands) | Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||||||||||||
| Mechanics Bancorp | |||||||||||||||||||||||||||||||||||
| Tier 1 leverage capital (to average assets) | $ | 1,854,132 | 8.65 | % | $ | 857,147 | 4.0 | % | n/a | n/a | |||||||||||||||||||||||||
| Common equity Tier 1 capital (to risk-weighted assets) | 1,854,132 | 14.09 | % | 921,471 | 7.0 | % | n/a | n/a | |||||||||||||||||||||||||||
| Tier 1 risk-based capital (to risk-weighted assets) | 1,854,132 | 14.09 | % | 1,118,929 | 8.5 | % | n/a | n/a | |||||||||||||||||||||||||||
| Total risk-based capital (to risk-weighted assets) | 2,141,745 | 16.27 | % | 1,382,207 | 10.5 | % | n/a | n/a | |||||||||||||||||||||||||||
| Mechanics Bank | |||||||||||||||||||||||||||||||||||
| Tier 1 leverage capital (to average assets) | $ | 2,054,349 | 9.58 | % | $ | 857,560 | 4.0 | % | $ | 1,071,950 | 5.0 | % | |||||||||||||||||||||||
| Common equity Tier 1 capital (to risk-weighted assets) | 2,054,349 | 15.59 | % | 922,177 | 7.0 | % | 856,307 | 6.5 | % | ||||||||||||||||||||||||||
| Tier 1 risk-based capital (to risk-weighted assets) | 2,054,349 | 15.59 | % | 1,119,786 | 8.5 | % | 1,053,917 | 8.0 | % | ||||||||||||||||||||||||||
| Total risk-based capital (to risk-weighted assets) | 2,214,783 | 16.81 | % | 1,383,266 | 10.5 | % | 1,317,396 | 10.0 | % | ||||||||||||||||||||||||||
As of the dates set forth in the above tables, Mechanics Bancorp exceeded the minimum required capital ratios applicable to it and Mechanics Bank's capital ratios exceeded the minimums necessary to qualify as a well-capitalized depository institution under the prompt corrective action regulations. In addition to the minimum capital ratios, Mechanics Bancorp and Mechanics Bank are required to maintain a capital conservation buffer consisting of additional Common Equity Tier 1 Capital of 2.5% in addition to the required minimum levels in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses. Mechanics maintained capital ratios necessary to satisfy the capital conservation buffer requirements as of the dates indicated. At March 31, 2026, the capital conservation buffers for Mechanics Bancorp and Mechanics Bank were 7.92% and 8.21%, respectively.
The Company paid cash dividends of $0.40 per share for Class A shareholders and $4.00 per share for Class B shareholders in the first quarter of 2026 and paid cash dividends of $0.21 per share for Class A shareholders and $2.10 per share for Class B shareholders in the fourth quarter of 2025. The Company did not pay cash dividends in the first three quarters of 2025. The amount and declaration of future cash dividends are subject to approval by our Board of Directors and certain statutory requirements and regulatory restrictions.
We had no material commitments for capital expenditures as of March 31, 2026.
Non-GAAP Financial Measures and Reconciliations
This document contains non-GAAP financial measures of our financial performance, including return on average tangible equity, efficiency ratio (excluding the impact of intangibles amortization), tangible book value per share and tangible common equity ratio. We believe that these non-GAAP financial measures provide useful information because they are used by management to evaluate our operating performance, without the impact of goodwill and other intangible assets. However, these financial measures are not intended to be considered in isolation of or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP and should be viewed in addition to, and not as an alternative to, its GAAP results. The non-GAAP financial measures Mechanics presents may differ from similarly captioned measures presented by other companies.
The following table presents the calculations of our non-GAAP financial measures.
| (dollars in thousands, except per share amounts) | Quarter Ended | |||||||||||||||||||||||||
|
Return on Average Equity and Return on Average Tangible Equity (1)
|
Ref. | March 31, 2026 | December 31, 2025 | March 31, 2025 | ||||||||||||||||||||||
| Net income | (a) | $ | 44,090 | $ | 111,187 | $ | 43,791 | |||||||||||||||||||
|
Add: intangibles amortization, net of tax (2)
|
5,254 | 5,442 | 1,958 | |||||||||||||||||||||||
| Net income, excluding the impact of intangible amortization, net of tax | (b) | $ | 49,344 | $ | 116,629 | $ | 45,749 | |||||||||||||||||||
| Average shareholders' equity | (c) | $ | 2,860,494 | $ | 2,792,310 | $ | 2,334,768 | |||||||||||||||||||
| Less: average goodwill and other intangible assets | 1,052,479 | 984,105 | 880,812 | |||||||||||||||||||||||
| Average tangible shareholders' equity | (d) | $ | 1,808,015 | $ | 1,808,205 | $ | 1,453,956 | |||||||||||||||||||
|
Return on average equity (3)
|
(a) / (c) | 6.25 | % | 15.80 | % | 7.61 | % | |||||||||||||||||||
|
Return on average tangible equity (non-GAAP) (3)
|
(b) / (d) | 11.07 | % | 25.59 | % | 12.76 | % | |||||||||||||||||||
| Quarter Ended | ||||||||||||||||||||||||||
|
Efficiency Ratio (1)
|
Ref. | March 31, 2026 | December 31, 2025 | March 31, 2025 | ||||||||||||||||||||||
| Noninterest expense | (e) | $ | 130,427 | $ | 129,510 | $ | 85,638 | |||||||||||||||||||
| Less: intangibles amortization | 7,222 | 7,479 | 2,738 | |||||||||||||||||||||||
| Noninterest expense, excluding the impact of intangible amortization | (f) | $ | 123,205 | $ | 122,031 | $ | 82,900 | |||||||||||||||||||
| Net interest income | (g) | $ | 179,045 | $ | 182,982 | $ | 128,454 | |||||||||||||||||||
| Noninterest income | (h) | $ | 21,020 | $ | 78,521 | $ | 14,981 | |||||||||||||||||||
| Efficiency ratio | (e) / (g+h) | 65.2 | % | 49.5 | % | 59.7 | % | |||||||||||||||||||
| Efficiency ratio (non-GAAP) | (f) / (g+h) | 61.6 | % | 46.7 | % | 57.8 | % | |||||||||||||||||||
| (dollars in thousands, except per share amounts) | As of | |||||||||||||||||||
| Book Value per Share and Tangible Book Value per Share | Ref. |
March 31, 2026 |
December 31, 2025 |
|||||||||||||||||
| Total shareholders' equity | (i) | $ | 2,791,392 | $ | 2,862,375 | |||||||||||||||
| Less: goodwill and other intangible assets | 1,048,574 | 1,055,796 | ||||||||||||||||||
| Total tangible shareholders' equity | (j) | $ | 1,742,818 | $ | 1,806,579 | |||||||||||||||
| Common shares outstanding - Class A and B | (k) | 221,400,590 | 221,305,009 | |||||||||||||||||
| Common shares outstanding - Class A | 220,286,142 | 220,190,561 | ||||||||||||||||||
| Common shares outstanding - Class B adjusted | 11,144,480 | 11,144,480 | ||||||||||||||||||
|
Common shares outstanding at period end - adjusted (4)
|
(l) | 231,430,622 | 231,335,041 | |||||||||||||||||
| Book value per share | (i) / (k) | $ | 12.61 | $ | 12.93 | |||||||||||||||
|
Tangible book value per share (non-GAAP)
|
(j) / (l) | $ | 7.53 | $ | 7.81 | |||||||||||||||
| As of | ||||||||||||||||||||
| Common Equity Ratio and Tangible Common Equity Ratio | Ref. |
March 31, 2026 |
December 31, 2025 |
|||||||||||||||||
| Total shareholders' equity | (m) | $ | 2,791,392 | $ | 2,862,375 | |||||||||||||||
| Less: goodwill and other intangible assets | 1,048,574 | 1,055,796 | ||||||||||||||||||
| Total tangible shareholders' equity | (n) | $ | 1,742,818 | $ | 1,806,579 | |||||||||||||||
| Total assets | (o) | $ | 21,388,955 | $ | 22,351,475 | |||||||||||||||
| Less: goodwill and other intangible assets | 1,048,574 | 1,055,796 | ||||||||||||||||||
| Total tangible assets | (p) | $ | 20,340,381 | $ | 21,295,679 | |||||||||||||||
| Common equity ratio | (m) / (o) | 13.05 | % | 12.81 | % | |||||||||||||||
|
Tangible common equity ratio (non-GAAP)
|
(n) / (p) | 8.57 | % | 8.48 | % | |||||||||||||||
(1)Prior period comparative disclosures for the fourth quarter of 2025 have been adjusted to reflect the impact of adoption of ASU 2025-08.
(2)Estimated statutory tax rate of 27.25%, 27.25% and 28.50% for the quarter ended March 31, 2026, December 31, 2025 and March 31, 2025, respectively.
(3)Ratios are annualized.
(4)Includes 11,144,480 Class A Shares issuable upon the conversion of 1,114,448 Class B Shares outstanding. Class B Shares also are treated as if such share had been converted into ten Class A Shares for purposes of calculating the economic rights of the Class B Shares, including upon liquidation of the Company or the declaration of dividends or distributions by the Company.
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